Chile’s national currency is the peso (CLP). For 2021, the average exchange rate was CLP 759.27 to USD 1.1 That same year, the average worker in Chile earned 10 776 819 (country estimate).2

Taxes allowances and tax thresholds for the personal income tax system and upper earnings limits for social security contributions are determined using and expressed in CPI-indexed units. As of December 30, 2021, the following currency values applied to these units:

Each family member declares and pays taxes separately.

  • Education tax credit: Parents with children attending preschool, primary, special or secondary education, with a total annual taxable income (both parents) of up to CLP 24 545 458 (UF 792), are entitled to a tax credit of CLP 136 364 (UF 4.4) per child, for expenses related to education. Children shall have a minimal school attendance of 85% and the school must be recognized by the State. This tax credit can be claimed by both parents, or only by one of them.

  • Relief for social security contributions: Employee’s compulsory social insurance contributions are deductible for income tax purposes regardless of whether they are paid to government or private health insurers. (See section 2.1 below).

  • Voluntary contributions and APV (Voluntary Pension Fund Savings): Voluntary contributions to pension funds and voluntary pension savings fund (APV) may be deducted from taxable income, with an annual upper limit of CLP 18 595 044 (UF 600.)

  • Mortgage Interest: Taxpayers whose annual income falls below CLP 58 504 680 (UTA 90) may deduct from their taxable income 100% of interest paid within a year for mortgage loans. This percentage is reduced in the case of taxpayers with higher incomes up to CLP 97 507 800 (UTA 150). This relief cannot be granted along-side the DFL2 Housing Mortgage Loan Payments benefit, and cannot exceed CLP 5 200 416 (UTA 8) per annum.

Tax rates are applied on monthly income and these taxes are retained and paid by employers. In order to estimate taxes, tax rates are applied on an annual basis, on the annual average income (starting of 1 January 2021, the maximum marginal tax rate was raised from 35% to 40%, and the number of tax brackets was augmented from seven to eight):

As of 1 January 2017, the President of the Republic, Ministers, Undersecretaries, Senators and Deputies have tax thresholds and rates applicable specifically to their income, if it is higher than 150 UTA:

No taxes apply to income at state or local government level.

Employees have mandatorily to contribute 7% of their income to a health insurance plan subject to an upper earnings limit of CLP 29 259 790 (UF 979.3). They are free to choose whether to pay into a government-managed plan or alternatively to a private insurer3 (Isapres). The public insurance is based on a joint system that, in general, operates on an equal basis for all its beneficiaries, irrespective of the risk and the amount of the individual contribution. Its financing is partly covered by the contributions and partly by way of a government subsidy. Premiums paid to the plans offered by Isapres are based on the contributors’ individual risk and these plans are exclusively financed with the employees’ contributions. Public insurance contributions are included in the modelling as the majority of employees pay into plans managed by the government sector.

Employee social security contributions in respect of pensions and unemployment are not classified as taxes in this report; though they are included in modelling as deductions for income tax.

  • The mandatory contributions to pension funds and unemployment insurance plans are not classified as taxes, since the payments are made to private institutions. In 1980, the public social security system was replaced with a privately managed individual capitalisation system. This system is obligatory to all employees who have joined the labour force since 1983 and free-lance workers since 2012, and of a voluntary nature to all contributing to the former system. The contributions to the old government operated pension fund system are not included in the modelling because they relate to a minority of employees and the system will eventually disappear once the contributions and related benefit payments to those individuals remaining in it have ceased.

  • The modelling allows that the contributions to pension funds and unemployment insurance managed by private institutions are deducted from gross income. In the case of their pension funds, these payments amount to 10% of their gross income, with an upper earnings limit of 29 259 790 (UF 979.3). Added to that there is an amount that varies depending on the managing company that covers the management of each pension fund account.4 The monthly unemployment insurance premium is 0.6% of the employee’s gross income, with an upper earnings limit of CLP 44 096 522 (UF 1 471.3). Employees do not pay the monthly unemployment insurance premium when they have a fixed-term contract or after 11 years of labour relationship.

  • There are also mandatory contributions to managed funds by members of the police force and the army which are classified as taxes but are not included in the modelling as they relate to a minority of the overall workforce.

  • If the employee has a high risk job, that person has to make an additional contribution of 2% (heavy work) or 1% (less heavy work) of the gross income with an upper earnings limit of CLP 29 259 790 (UF 979.3) to the pension fund account.

The pension and unemployment contributions are not included in the Taxing Wages calculations, as they are not considered as taxes in the report. However, information on “non-tax compulsory payments” as well as “compulsory payment indicators” is included in the OECD Tax Database, which is accessible at

There are five categories of employer social security contribution, none of which are classified as tax revenues in this report.

  • Employers make mandatory payments of 0.90% of their employees’ gross income for an occupational accident and disease insurance policy subject to an upper earnings limit. For the majority of employees the payments are made to employers’ associations of labour security which are private non-profit institutions. Those remaining are made to the Social Security Regularisation Unit (ISL). Although this latter organisation is controlled by the government, the funds are invested on the private institutions market. The employers also pay an additional contribution which depends on the activity and risk associated to the enterprise (it cannot exceed 3.4% of the employees’ gross earnings). This additional contribution could be reduced, down to 0%, depending on the safety measures the employer implements in the enterprise. If health and safety conditions at work are not satisfactory, this additional contribution could be applied with a surcharge of up to 100%.

  • Employers shall make a mandatory contribution of 0.03% of the employee’ gross income to a fund which finances insurance coverage for working parents of children aged 1 to 15, or ages 1-18, whichever applies, that have a serious health condition, so that the parents can take a leave of absence from their work in order to accompany and take care of them; therefore, during this period the parents shall have the right to assistance financed by said fund (in Spanish, “Fondo SANNA”) that will replace, in total or partially, their monthly earnings. The collection of this contribution is initially delegated to the ISL and to the employers’ association of labour security.

  • Employers make payments of 2.4% of each employee’s income (0.8% after 11 years of labour relationship and 3% for fixed-term contracts) with an upper earnings limit of CLP 44 096 522 (UF 122.6 monthly) to finance unemployment insurance. These funds are managed privately.

  • Employers are required to pay a disability insurance of 2.08% (as from October 1st 2021) of the employees’ gross income, with an upper earnings limit of CLP 29 259 790 (UF 979.3), collected by the pension fund manager, and managed by an insurance company.

  • If the employee has a high risk job, the employer has to pay 2% (heavy work) or 1% (less heavy work) of the employee’s gross income, with an upper earnings limit of CLP 29 259 790 (UF 979.3) to the pension fund account.

  • Employers must purchase an individual Covid-19 insurance for private-sector employees working on-site. The estimated average price is CLP 8 683.

No such transfers are paid.

The “Family Allowance” is paid on a monthly basis to any employee making social security contributions who has dependent children. The definition of dependants includes:

  • Adopted children as well as those born to the parents;

  • Children up to the age of 18 or 24 years provided they are single and are regular students in an elementary, secondary, technical, specialised or higher education establishment;

  • The amount of the payment depends on the number of dependent children and the beneficiary’s level of income according to the table below. The modelling assumes that the benefit is assessed on the spouse with the lower earning level where both spouses are working.

  • Middle Class Bonus (Bono Clase Media) was paid once during 2021 to workers with a decrease of more than 20% in their incomes (not modelled because most workers don´t meet this requirement) or with an average monthly income between the minimum wage (CLP 337 000) and a threshold of CLP 408 125. The bonus wasof CLP 500 000.

  • Emergency Family Income (Ingreso Familiar de Emergencia) was an income received by households with less than CLP 800 000 per month per capita incomes. It is received by the head of family and the total amount depends on the number of household members according to the following table:

None of the measures taken by the Chilean government due to COVID-19 to date, has a direct impact on labour taxation and taxing wages model. However, it is important to mention the Employment Protection Law No. 21,227/2000, in which the employer, under certain circumstances, puts the contract on hold, keeps paying the SSC, and employees can get part of their wages through the unemployment insurance fund. This measure ended in October 2021.

However, direct cash transfers regarding COVID pandemic mentioned in points 3.3 and 3.4, modified general formulation of Taxing Wages model, as these transfers were not present on 2020 version of TW. These measures were temporary and ended in 2021.

  • The source of information is a survey conducted by the National Statistics Institute (INE) to determine the Salary and Labour Cost Index. This nationwide survey is carried out on a monthly sample and gathers information on salaries and labour costs. It applies to companies with at least 5-worker payrolls grouped in accordance with ISIC4.CL 2012,5 covering workers in industry sectors B to R.6

  • The average gross earning was obtained by multiplying the average hourly wage by the average number of hours worked. It covers both full and part-time workers.

  • In Chile very few employers make any contributions towards health schemes for their employees, and the relevant information is not available. 

2021 Parameter values

2021 Tax equations

The functions which are used in the equations (Taper, MIN, Tax etc) are described in the technical note about tax equations. Variable names are defined in the table of parameters above, within the equations table, or are the standard variables “married” and “children”. A reference to a variable with the affix “_total” indicates the sum of the relevant variable values for the principal and spouse. And the affixes “_princ” and “_spouse” indicate the value for the principal and spouse, respectively. Equations for a single person are as shown for the principal, with “_spouse” values taken as 0.


← 1.

← 2. Information of monthly earnings available up to November 2021. Earnings of December 2021 are estimated and will be ratified by March 5th 2021.

← 3. Enrollment in the private health system during 2019 amounted to 19.41% of all beneficiaries.

← 4. Average cost in 2021 was 1.17% of gross income.

← 5. ISIC4.CL 2012 is a Chilean classifier of economic activities, based on ISIC Rev.4.

← 6. O (8422) “Defense Activities” and O (8423) “Public aorder and safety activities” are not included.

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